Tech firms see Internet gambling as a sure thing

Silicon Valley is betting that online gambling is its next billion-dollar business, with developers across the tech industry turning casual games into occasions to wager.

At the moment these games are aimed overseas, where attitudes toward gambling are more relaxed and online betting is generally legal, and extremely lucrative. But game companies, from small teams working out of the living room to
Facebook and
Zynga, have their eye on the ultimate prize: the rich U.S. market, where most types of real-money online wagers have been cleared by the Justice Department.

Nevada legalized online gambling last week, and Delaware is laying the groundwork for virtual gambling. Within a few months they will most likely be joined by New Jersey. Bills have also been introduced in California, Mississippi, Iowa and other states, driven by the realization that online gambling could bring in welcome streams of tax revenue. In Iowa alone, online gambling proponents estimated that 150,000 residents were playing poker illegally.

Silicon Valley is hardly discouraged. Companies here believe that online gambling will soon become as simple as buying an e-book or streaming a movie, and that the convenience of being able to bet from your couch, surrounded by virtual friends, will compensate for the lack of glittering ambience found in a real-world casino.

“Gambling in the U.S. is controlled by a few land-based casinos and some powerful Indian casinos,” said Chris Griffin, chief executive of
Betable, a London gambling startup that helps companies negotiate licenses and handle the betting aspects of the business. “What potentially becomes an interesting counterweight is all of a sudden thousands of developers in Silicon Valley making money overseas and wanting to turn their efforts inward and make money in the U.S.”

Betable has set up shop in San Francisco, where 15 studios are now using its back-end platform.

“This is the next evolution in games, and kind of ground zero for the developer community,” Griffin said. Overseas, online betting is generating an estimated $32 billion in annual revenue – nearly the size of the U.S. casino market. Juniper Research estimates that betting on mobile devices alone will be a $100 billion worldwide industry by 2017.

“Everyone is really anticipating this becoming a huge business,” said Chris DeWolfe, a co-founder of the pioneering social site Myspace, who is throwing his energies into a gaming studio with a gambling component backed by, among others, the personal investment funds of Jeff Bezos,
Amazon's founder, and Eric Schmidt,
Google's executive chairman.

As companies eagerly wait for the U.S. market to open up, they are introducing betting games in Britain, where
Apple has tweaked the iPhone software to accommodate them. Facebook began allowing online gambling for British users last summer with Jackpotjoy, a bingo site; deals with other developers followed in December and this month Zynga, the company that developed FarmVille, Mafia Wars, Words With Friends and many other popular casual games, is advertising the imminent release of its first betting games in Britain.

“All your favorite Zynga game characters will be there, except this time they'll have real money prizes to offer you,” an ad says. “Play online casino games for pennies and live the dream!”

DeWolfe's studio,
SGN, is also on the verge of starting its first real-money games in Britain.

“Those companies that have a critical mass of users that are interested in playing real-money games are going to be incredibly valuable,” he said.

The powerful Las Vegas and Indian casinos have mixed attitudes toward online gambling.
Caesars Entertainment in 2011 acquired the Israeli startup
Playtika, developer of the popular Facebook game Slotomania, for about $180 million, offering it a springboard into the digital world. But Sheldon Adelson, the Vegas magnate and major Republican Party donor, is opposed to online betting because he thinks children will end up gambling.

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